Wesfarmers boosts profit on continued Coles, Bunnings growth

Retail, mining and agribusiness conglomerate Wesfarmers has posted an 11.2 per cent rise in profit.

The company's $1.43 billion half-year net profit came from $31.85 billion of revenue, which was up a more modest 4 per cent on the same period a year ago.

Wesfarmers' net profit was boosted by one-off gains from its sale of a 40 per cent stake in Air Liquide WA, and slightly dented by an increase in reserves to cover insurance claims from the February 2011 Christchurch earthquake.

Adjusting for the one-offs, the conglomerate's profit growth was a more modest 6.3 per cent.

Wesfarmers says its two main retail businesses drove growth, with Coles earnings growing 10.7 per cent to $836 million for the half, and hardware chain Bunnings posting an 8.5 per cent rise in earnings to $562 million.

Performance amongst its other retail outlets was mixed, with Officeworks profit growing more than 10 per cent to $42 million, and Kmart earnings up 5.7 per cent to $260 million, but Target continued to struggle.

The troubled discount department store saw profit more than halve compared to the same time a year ago, falling 52.7 per cent to $70 million.

Wesfarmers says Target has struggled with a backlog of winter stock, which had to be cleared at discounted prices, whereas its decision to lower general promotional discounting had dented sales.

The conglomerate's resources division also struggled amid falling coal prices - earnings were down 36.6 per cent to $59 million, despite an increase in output.

A rise in reserve estimates for the Christchurch earthquake pushed the insurance division's earnings down slightly to $99 million, but they would have been 38.5 per cent higher if not for that earthquake impact.

The Wesfarmers chemical, energy and fertilisers business had a $95 million boost from the sale of its Air Liquide WA stake but, excluding that, profit still rose 5.8 per cent.

As with Pacific Brands and Ansell, which both reported earlier this week, Wesfarmers' industrial safety division reported a 17 per cent fall in earnings to $73 million due to the struggles in manufacturing, and now also in mining construction and engineering.

The company also saved money on capital spending, due to less property investment by Coles and Bunnings and increased retail property sales.

The company has declared an interim dividend of 85 cents, fully-franked, up 10.4 per cent from a 77-cent interim payment last year.

However, investors seem to have expected better, with Wesfarmers shares off 1.7 per cent to $42.67, while rival Woolworths was up 0.6 per cent to $35.90.